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WHICH INFORMATION DO WE USE?
WHICH INFORMATION DO WE USE?
Standard economic indicators (GDP) are typically published with 2-3 months delay and cannot be used to assess the extent of economic shocks in the short term, when policymakers need timely information and to respond promptly.
OCEET employs high-frequency data to track in real time the impact of shocks on economic activities. Energy consumption is a major input of practically all economic activities, representing therefore a strong short-time proxy for the overall activity in a country or region. Within OCEET, we employ daily electricity consumption to provide high-frequency estimates nowcasting the economic impacts of COVID-19. The methods are described more in detail by Fezzi and Fanghella (2020; 2021).
WHAT ARE OUR ESTIMATES?
WHAT ARE OUR ESTIMATES?
The figure above compares electricity consumption in 2019 with 2020. We can see that as the first wave of the pandemic ravaged through Italy since March 2020, we can see a sharp decline in electricity consumption with respect to the previous year. Electricity consumption recovered towards during the summer, as economic activity resumed in many sectors.
Our methodology estimates that the GDP was severely impacted, with year-on-year weekly growth rates going as low as -30% during the first lockdown, as shown in the figure below.
HOW DO OUR ESTIMATES COMPARE WITH OFFICIAL FIGURES?
HOW DO OUR ESTIMATES COMPARE WITH OFFICIAL FIGURES?
Our nowcasting approach based on energy consumption proved to be very close to the actual GDP figures, once these are released. The correlation coefficient between the two measures is equal to 0.98, as shown in the figure below. Our COVID-19 tracker does not only accurately follow short-term GDP growth, but also provide high-frequency data telling a more timely information on what happens between one quarter and the next.
The figure below is from Fezzi and Fanghella (2021) and shows the difference between our estimates and the official OECD figures. The dots represent estimates for the 2020 Q1 and the squares for 2020 Q2. In gray we plot estimates that are indicated as “provisional” in the OECD database.
As the COVID-19 crisis develops and hopefully eventually concludes, we will provide updated information on the impacts on the economic and energy systems. We will underline heterogeneous impacts by analysing data disaggregated at the geographical and sectoral level. The combined perspectives of the OCEET team will also offer insights on the implications for the energy transitions and the decarbonisation of the power sector.
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